Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 15, 1994 TAG: 9401150043
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Output at the nation's factories, mines and utilities rose 4.2 percent last year, as measured by the Federal Reserve's industrial production index. It was the strongest increase since 1988 and followed a 2.3 percent rise in 1992 and a drop of 1.8 percent in 1991, a recession year.
Economists are predicting a further improvement in the industrial growth rate this year, especially if the sluggish economies in Europe and Japan begin to improve and draw in more U.S. goods.
"I think industrial production will again show a sizable gain. It will be increasing faster than the overall economy," said economist Lynn Reaser of First Interstate Bancorp of Los Angeles.
She predicted the latest production advances would translate into job growth early this year.
The report, released Friday, was the latest sign that the economy picked up considerable steam as the year ended. Economists at the U.S. Chamber of Commerce estimated the growth rate in the gross domestic product hit 4.6 percent in the fourth quarter, the best of 1993.
Production increased during each of the final seven months of the year, rising 0.7 percent in December and 0.9 percent in November, which was the largest gain in a year.
In December, production at factories rose 0.7 percent; at mines and oil fields, 0.5 percent; and at utilities, 1 percent.
Manufacturing was led by a 4.9 percent monthly gain in auto production, up 19.4 percent from the year before. Computer and office equipment activity was up 2.9 percent for the month and 36.8 percent from a year earlier.
The operating rate at industrial firms rose to 83.5 percent of capacity, up from 83 percent a month earlier and 81 percent a year ago. Economists worry that as the number approaches 85 percent, production bottlenecks could occur, resulting in higher prices for scarce goods in high demand.
In a separate report, the Commerce Department said inventories at the nation's businesses rose 0.6 percent in November, the biggest increase since January 1991. Sales were even stronger, up 1.1 percent in their fourth consecutive gain.
Inventories on shelves and back lots totaled a seasonally adjusted $875.1 billion. Sales totaled $606.9 billion.
The inventory-to-sales ratio in November was 1.44, down from 1.45 a month earlier. That means it would take 1.44 months to exhaust stockpiles at the November sales pace.
The ratio, the lowest since 1982 when current inventory accounting methods were put in force, is considered a positive sign for future factory production and employment. It means any further pickup in sales should quickly translate into new orders to factories.
by CNB